Not long ago, I declared that I’m f*cking sick of the “ROI of social media” debate. The post got some attention, including a follow-up on ReadWriteWeb.

Good. It’s a conversation that needs to happen.

But in past posts, I neglected two topics:

1. A history of media metrics, thereby illuminating how much has changed and how important this is
2. The role of agencies as guides through a web 2.0 world

Today, I rectify that with a guest post on Critical Mass’ Experience Matters blog entitled Why Your Social Media ROI Is Broken– And How To Fix It. (Disclosure: I am employed by Critical Mass.)

Who Should Read This And Why

If you work in or with an agency, I recommend this post. It describes an agency’s changing responsibilities to their clients – how to help clients understand social media and find success with their web 2.0 ventures.

Most importantly, I hope it gives you courage to face this moving target. Here’s a description of the changing marketing world from my guest post:

We are moving from a period of raw quantitative measurement (i.e. How many unique visitors did we have?) to a qualitative period (i.e. Did our social media engagement create more trust which in turn created more sales?). Trust, loyalty, and brand advocacy aren’t intangible anymore.

Is your agency at least aware of these changes? How have they advised you regarding social media metrics?

Trash Your Crappy Web Metrics And Grow A Pair

This is not the time for timid marketers. If you aren’t ready to try new things and risk your neck everyday, please allow the rest of us to move past you.

Let me put it to you straight: web analysis allows you to determine the real ROI which, in turn, allows you to see what tactics are working and which aren’t.

Not the tactics that your boss likes or that tested well in focus groups – the tactics that really work.

Personally, I recommend facing these new challenges head on. It’s tough, but how else will you know if you are really reaching your goals?

What About You?

I would love to hear from you on this topic. Do you measure your social media outreach? If not, what is holding you back? If you do measure social media, what are the elements that you measure? Are these personalized to your goals?

In short, how’s it going out there?

Please check out Why Your Social Media ROI Is Broken– And How To Fix It and leave a comment there or here (comment section below). I look forward to hearing from you.

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I have a confession: I am f*cking sick of the “What’s the ROI of web 2.0 or social media” debate.

Not that I don’t think we shouldn’t talk about it – we should – but I’m sick of convincing everyone that there is one at all. If done correctly, you will see a return on investment. We can debate what the metrics should be, but you will succeed if you are open, honest, and provide something of value.

So can we stop talking about the ROI of web 2.0 tools as though it were an ephemeral mist?

I see a track-record of failure for the naysayers – those who prefer to sit on the sidelines while others take chances (and get the rewards). Here are a few examples from the naysayers:

• They didn’t understand the value of blogging platforms. “Who cares about all the navel-gazers?” That was until Jason Calacanis sold Weblogs Inc. to AOL for $25M in 2005.
• They didn’t understand the value of e-commerce. “No one’s going to give up their credit card information online!” These naysayers didn’t have much to say about Amazon.com’s $476M net income in 2007 though (source: Wikipedia).
• They didn’t understand the value of podcasting. “How does that relate to business?” I don’t think Gary Vaynerchuk worried about that though. He created WineLibraryTV.com and increased his business 10 fold to the tune of $45M per year.
• They didn’t understand the value of online word of mouth. “The 30-second spot is still king!” I can imagine their surprise when the marketing team at Warner Brothers told 7 rabid Harry Potter fans/bloggers about their new theme park. The result was 350M people hearing the news, all without out-bound media relations, marketing stunts, or expensive advertising (Source: The New Rules of Viral Marketing by David Meerman Scott).
• They didn’t understand the value of social networks. “Friendster never did me any good.” Then in September of 2007, Microsoft valued Facebook at $15B. With more than 50 million users and 200K joining every day, this doesn’t look like a fad.
• They didn’t understand the value of Second Life or other virtual worlds. “It’s just a bunch of weirdos with time to kill.” But engagement speaks for itself. The Weather Channel recently developed SL attractions that engage users for an average of 30 minutes per visit. Drew Stein, CEO of Involve 3D, builders of The Weather Channel’s virtual experience, had this to say: “It’s not like a commercial, where maybe they watched and maybe they didn’t. You’re talking about a user actually paying attention, and you can time it. That’s hard to replicate in any other medium” (Source: Fast Company).

So seriously, can we stop debating whether social media and web 2.0 tools have an ROI?

The question for your company is not if they have a return on investment, but how you can get that return on investment. That’s the challenge for your marketing team. And if they start whining about how unnecessary or unworthy web 2.0 is, prepare to join the other nay-sayers in the gutter of business.

I’m not the only one frustrated by the debate. Geoff Livingston explains why we keep going through it:

Often, companies want to know what they will get for $xxx,000 of social media engagement. What’s the ROI?!?!? And we play the game because we have to justify corporate expenditures in this era. But somewhere the soul of social media gets lost in these discussions.

From what I gather though, the audience of this blog is fairly split between marketers who get it and marketing folks and small business owners who want to get it. Today’s post is venting with the first group. In my next post, however, I will address the second group.

If you’re in the second group, you feel the wave approaching. You know social media tools are a big thing but you’re not quite sure how they apply to your business and how you sell it up the corporate food chain. That’s fine – welcome to the discussion and good for you for having the cajones to figure it out.

My next post will give you some ideas about how to think of social media in the context of your business and provide enough web 2.0 ROI for you to sell the idea to your boss. One good way not to miss it is to subscribe.

Update: That next post I mentioned can be viewed on ReadWriteWeb: 5 Ways To Sell Social Media To Your Boss.

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Generation Y – roughly those aged 13-29 – are among the strongest consumers and influencers. And while social media like Facebook, delicious, and Flickr have garnered media attention, many businesses are still wary of dipping a toe in the social media water.

I argue that we can gauge return on investment (or influence) for Gen Y by looking at their buying power and online behavior and therefore that it is imperative that (most) businesses participate in social media. Plus, I will give you the research to back up these assertions so you can prove it to your boss.

Flashback: Ohio

Growing up in pre-internet Ohio, I spent a good chunk of my allowance and lawn-mowing money on comic books at the local pharmacy. If they were sold out of my usual books, I was SOL until the following month. Scarcity of goods required that I go where they were (and quickly!) or I would miss out.

Fast-Forward: Today

Now, post-internet, these stories sound quaint. Given a bank account, any kid can get any comic book from anywhere in the world. So what does this have to do with social media and Generation Y?: proximity to resources.

Today, consumers expect businesses to come to them. Long gone are the lazy summer bike rides to the pharmacy – today, young people expect to be able to spend their money just about anywhere. And where are they? Online, in general, and on social media, specifically.

Maybe this shift isn’t a surprise to you, but let me prove it with research (easily printable for timid bosses or humbugs).

Gen Y By The Numbers

• Buying Power: “Among 13 to 21 year-olds alone, over $120 billion was spent in 2007…The group’s income is predicted to rise through at least 2017, when it will approach $3.5 trillion.” (The Harris Poll and Javelin Strategy & Research via eMarketer.)
• Influence: “71% have influence over parental decisions about cable, DSL or dish-satellite services…62% have influence over which HDTV set and programming package to buy…70% feel their expectations and demands are far greater than their parents’ for rich media experiences…and on-the-go broadband access.” (Motorola via MarketingVox)
• Online Consumption: “The group is very comfortable shopping online. One-half of consumers under age 24 made an Internet purchase between April 2007 and February 2008.” (Nielsen Online via eMarketer)
• Social: “One statistic that jumps out is that young men and women are very likely to be Joiners, with around 60% participation in social networks, more than twice the level of participation of average adults.” (“Groundswell: Winning in a World Transformed by Social Technologies, Li and Bernoff, pg. 46)

Simply put, Gen Y are very powerful consumers. Plus, they are more social online than any other group. Facebook isn’t a fad. You cannot bury you head in the sand and wait for a return to the good, ol’ marketing funnel. That model is gone. Long live the new model.

Convincing Your Boss: Relate It To What S/he Knows And Emphasize ROI And Cost

The change is scary for everyone, but come on – this fits into an old-school model your boss will understand. S/he knows to target an audience and speak their language. S/he knows you go to where your consumer hangs out. The key to pitching a social media strategy to an old-school boss is to relate it in an old-school way.

Here’s another leg up on your rivals in the company: with a social media strategy, you will have the ROI to prove success rather than just conjecture. Web metrics and communication being what it is online, it’s likely that you will have more information than you can handle about your progress than less.

Finally, social media is cheap. Like, dirt cheap. I have worked in print publication and direct mail. That world is slower, less precise, and loads more expensive. Plus, if things change between the writing and the printing, you are stuck with useless package filler. Online is better.

The Gist

In other words, to convince your boss to partake in social media, speak his/her language. You do it with consumers all the time. Turn your methods inward and go for it.

Sidenote: If your boss still reacts negatively to social media, this is a useful sign that your company is not acknowledging the passing of time. Get off that sinking ship quickly!

While I have fond memories of biking to the pharmacy pre-internet, they are not memories so fond that I want to go back to them. I understand that while those times were nice, the times ahead are probably going to be nicer. Hopefully your boss will too.

Have you convinced an old-school boss to partake in social media? Feel free to suggest other tactics in the comments section. And if you like what you just read please consider signing up for email updates below.

The thing that is still missing is quantifiable data about these interactions. We’re in a theory stage – we know what’s right because we have experienced it – but we are still waiting for proof in numbers. Forrester Research made a giant step in the right direction when they introduced social technographics.

Social technographics is an analysis of consumers’ approach to social media – not just which ones they use, but understanding how they use the medium in their daily life. You can download the full report on Forrester Research’s website (there is a fee) or read the book on the same topic published April 21, 2008: Groundswell: Winning in a World Transformed by Social Technologies by Charlene Li and Josh Bernoff. (There is also a ton of free goodies at the Groundswell blog.)

I sat in on a webinar last week where Charlene and Josh expounded on their work. Josh summed up the goal of this work: “Think about what you want to accomplish, not the technology.” There is so much fascination about what technology can do that marketers often forget the question is what technology can do for you. The webinar came back again and again with the message to use this data to inform a strategy for your clients. (You can find the resulting Q&A published post-webinar here.)

How’s It Work?

Charlene and Josh categorize web users into six sections based on the level of their activity, from Creators to Inactives. I have not seen a clear but simple ranking system like this before and I certainly hope it is accepted as an industry standard. The real value, however, comes from their detailed analysis of each category’s activity.

I won’t go into all of the details of their work, but they go into serious detail about each group. There are some valuable insights to be garnered from their work. But the research does not get lost in either theory or numbers – there are very specific, actionable suggestions.

What’s The Catch?

There isn’t one as far as I can see. Charlene and Josh set up a system and fill it with data very valuable to marketers. Forrester is one of the top organizations in online research and analytics (if not the very best), so it isn’t surprising to see this level of work from them. I do, however, have two small concerns.

• One nagging concern is the age of the data (all from Q4 2006). While this isn’t grievously old, there have been trends in that time that might change the data somewhat (Facebook opening up, Twitter emerging, etc). That said, I understand the huge amount of work that goes into collecting and analyzing this amount of information, so I can’t fault Forrester that much (plus, I think the underlying theories are probably unaffected).
• The second concern is the wording of the questions. For instance, when asked whether they do the following activities at least monthly, respondents were given several choices, including “Use social networking sites” and “Watch peer-generated video.” I wonder how responses would have changed if they offered examples like MySpace, Facebook, Eons, and Gather for the first question or YouTube and Google Video for the second one. (I read a report recently that mentioned a large section of people who claimed not to go online because they did not realize they were online when they logged into Hotmail or searched on Google.)

The Gist

As mentioned before, social technographics should be used to build your strategy. “Rather than pursue Social Computing technologies based on fashion, marketers need to think about how they want to engage with their customers and prospects – and create content, features, and functionality that create a path for participation.” ‘Nuff said.

If you’re going to take seriously the new business model in a Web 2.0 world, you owe it to yourself to be equipped with the best research. As far as I can tell, this is it.

Then, just yesterday, I read both David Oglivy’s chapter “18 Miracles of Research” in On Advertising and Hank Williams’ post Who Needs Market Research. The stars seem aligned to answer a few questions about market research, including: Why can I not rely solely on market research and how can the online channel help?

Sure, research is helpful to some extent. As Ogilvy said, “Advertising people who ignore research are as dangerous as generals who ignore decodes of enemy signals. (pg. 158)” But you are making a severe mistake if you expect focus groups, polls, and testing to divine your strategy like a Magic 8-ball.

Market research (especially customer-focused research) must be taken with a sizable grain of proverbial salt. Here are four reasons why:

1. While I think there is some use of market research, I agree with Hank Williams’ hypothesis that content and experience are much more important. People cannot articulate an experience they’ve never had. Focus on producing good content and a good experience – not whether people claim that they understand how they think they will respond to a hypothetical situation. And even if you have the product or advertisement, do you really think people will respond the same way to it during a focus group at the mall as they would in their own homes?

2. Often times, people can’t articulate their feelings about a product at all. Malcolm Gladwell has a few intriguing examples in Blink. From Gladwell: “It [the Aeron chair] looked different. There was nothing familiar about it. Maybe the word ‘ugly’ was just a proxy for ‘different’ ” [said Bill Dowell, research lead on the Aeron]. The problem with market research is that often it is simply too blunt an instrument to pick up this distinction between the bad and the merely different. (pg. 174)”

Not only can someone not tell you about an experience they have had, they often can’t articulate one they have had. (Think about all the stories of witnesses picking the wrong suspect in a line-up.)

3. Market research produces a false sense of certainty. Many businesspeople are cowards (admit it, you’ve seen them). They want to keep their job rather than do their job, so they spend all day making sure they don’t get in trouble (read: take risks).

Listen up, college students: Marketing does not bode well for the risk-adverse. And market research is often the tool of the risk adverse. It excuses the peon’s work to the manager, the manager’s decisions to the VP, and the VP’s guidance to the President.

Gladwell goes on, this time using television shows as an example.

“Viewer didn’t actually hate [All in the Family and The Mary Tyler Moore Show]. They were just shocked by them. And all the ballyhooed techniques used by the armies of marketer researchers at CBS utterly failed to distinguish between these two very different emotions.

But testing products or ideas that are truly revolutionary is another matter, and the most successful companies are those that understand that in those cases, the first impressions of their consumers need interpretation. We like market research because it provides certainty – a score, a prediction; if someone asks us why we made the decision we did, we can point to a number. But the truth is that for the most important decisions, there can be no certainty. (pg. 175 – my emphasis)”

4. People knowingly or unknowingly lie or give the answer they think they ought to. It’s an unpleasant truth. Spend any time in politics and you will become a believer too.

From Ogilvy: “Respondents do not always tell the truth to interviewers. I used to start my questionnaires by asking, ‘Which would you rather hear on the radio tonight – Jack Benny or a Shakespeare play?’ If the respondent said Shakespeare, I knew he was a liar and broke off the interview. (pg. 164)”

In addition to saying what they think you want to hear (as in Ogilvy’s example), remember that many people even today carry deep biases. Watch the exit polls after this year’s Presidential campaign. I guarantee the exit poll results will be significantly different from the actual voting in favor of McCain. While people want to say they will vote for a woman or an African-American, things change when they’re alone in the booth. The same behavior applies to products and advertisements

Why The Online Channel Improves This Process:

People experience websites and the metrics (time on page, pageviews, clicks, bounce rate, etc) prove their interests. You can be certain of this because metrics don’t lie.

Despite all this, we have spent decades believing in and promoting the old way of market research. It was to be expected – we had nothing else to go on.

Now, however, web analytics free us from market research. Instead of asking “What would you do in this situation,” we can actually measure behavior, with certainty, in real time.

There is no reason to run a focus group at the mall or pay for phone interviews. Almost every demographic is well represented online. The results are more accurate and it costs far less. Why would you do it the old way?

If your company still partakes in these practices, re-read #3. Someone there needs to be assuaged and reassured. They are so uncertain of the product or ad that they cling to something tangible: people gathered, surveys marked in pencil, spreadsheets checked and cross-checked.

Sure, sometimes it is a useful exercise to do the old customer-focused market research. It can sometimes serve a purpose – whether in extracting customer opinion or forcing businesspeople to solidify their positions. But market research ought not be a manipulative tool. You cannot neither predict the future nor truly influence behavior with just market research. My friend from Wrigley understood the distastefulness of this.

Build a relationship with your customer. Listen. Engage them. Foster trust. Develop these skills instead and you’ll hit it out of the park time.